At work the other day, I was actually considering either doing some actual work
or taking the afternoon off, after, of course, I finished reading the
government's Bureau of Economic Analysis release of the news that "Real gross
domestic product [GDP] - the output of goods and services produced by labor and
property located in the United States - increased at an annual rate of 3.2% in
the first quarter of 2010, (that is, from the fourth quarter to the first
quarter)” and that last quarter of 2009, "real GDP increased 5.6%."
My face is simultaneously showing surprise, disbelief and outrage - a rare and
thrilling theatrical talent - at this news, and to understand the expression
upon my face, think about how if the
growth in GDP was 3.2% in one quarter, then that would be an extrapolated
annual growth of a blistering 12.8%! Wow! I am surprised! You can see why I am
disbelieving, and you can see why I am outraged that anyone would say such a
preposterous thing!
Okay, this is unbelievable and laughable enough, but get a load of this: if you
took the 5.6% increase of the previous quarter's GDP growth and did the same
thing, then that would come out to 22.4% growth in GDP! 22.4%! Hahaha!
This is so ludicrously and humorously preposterous that I actually laughed out
loud, and Tom, whose desk is right next to mine, looks over and makes some rude
comment like "Mogambo's looking at porn again!" whereupon everybody else laughs
at me.
So I, in my own defense, say in reply, "No, I was not looking at porn on my
computer, you halfwit, which any observer would have known by simply noting
that I was laughing, and one does not laugh when looking at porn, and instead
one makes, you know, kind of a grunting, panting sound and saying things like
'ooooOOOOooohhhh!' Morons!"
Before they insulted me, I was going to generously show them that merely
computing 3.2% of our US$14 trillion GDP, we get the $448 billion figure of the
quarterly "growth" in GDP, which comes out to roughly $2 trillion per year,
which is - surprise! - roughly approximately nearly exactly precisely how much
money the federal budget-deficit spending is now pumping into the economy.
In short, it looks like the entire growth in GDP is due solely to - dollar for
dollar! - the deficit-spending by the federal government! Hahaha! "Growth!"
Hahahaha!
And this is before another large item is included in the calculation of GDP,
which is exports, which are a subtraction from GDP, which means that since we
had a $532 billion annual trade deficit (a negative number) in the last 12
months, subtracting a negative number from GDP magically results in an annual
addition to GDP of $532 billion - or $133 billion quarterly - just like that!
Hahahaha! "Growth!" Hahaha!
You'd never know it from the bureau, which admitted that "The increase in real
GDP in the first quarter" was influenced by "exports", although it did not say
that the trade deficit increased, but, instead, said only that "Imports, which
are a subtraction in the calculation of GDP, increased", although it did not
mention, for the benefit of us math-impaired guys out here, that their
calculation of GDP was thus increased by a math trick.
Then they actually seem to have told a lie when they said that "The
deceleration in real GDP in the first quarter" was partly due to "a
deceleration in imports", which actually went up by $41 billion, which would
seem to be an acceleration. Hmmm! What in the hell is going on?
And this does not even get into the ridiculous notion of a $14 trillion
free-market GDP, when the federal government is spending $4 trillion and the
cities and states are spending $2 trillion, which, ignoring a little
double-counting, is a combined $6 trillion, which is already 43% of GDP to
start with! Gaaaahhhh!
The really bad news was later in the report, where they noted that "The price
index for gross domestic purchases, which measures prices paid by US residents,
increased 1.7% in the first quarter, compared with an increase of 2.0% in the
fourth", which almost gave me a heart attack until I realized that they meant
that prices increased by 1.7% a YEAR, not in just the quarter. Whew!
Nevertheless, it's not more than 20 or 30 times a day when I see crap like this
when I think to myself "We're freaking doomed!" and right now is one of those
times, and today is one of those days. "We're freaking doomed!"
Which leads me, seamlessly, to my constant sermonizing to buy gold, silver and
oil, which will take, like magic, "you and me" out of the collective "we", as
in "We're freaking doomed!"
Richard Daughty is general partner and COO for Smith Consultant Group,
serving the financial and medical communities, and the editor of The Mogambo
Guru economic newsletter - an avocational exercise to heap disrespect on those
who desperately deserve it.
(Republished with permission from
The Daily Reckoning. Copyright 2010, The Daily Reckoning.)
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